Government's tax reform proposal leaked to the press aims to raise revenues by 2.35% GDP in 2022 and 1.79% in 2025

DOMINICAN REPUBLIC - In Brief 11 Oct 2021 by Magdalena Lizardo
A document from the Dominican government has been leaked to the press outlining the purposes of the tax reform that is expected to be formally disclosed in the next few days, and that so far has not been confirmed or denied by official bodies. In this document, the Dominican government lays down the need for a fiscal reform, based on an analysis of the evolution and current situation of the country's public finances: The Dominican Republic has one of the lowest fiscal burdens in LAC region.The Dominican Republic has one of the lowest public expenditures/GDP ratio in LAC region.During the 2008-2019 period, public deficits averaged 3.3% of GDP.The Dominican Republic has one of the largest accumulated debts as a percentage of fiscal revenues worldwide.The Dominican Republic has one of the highest public debt interest/fiscal revenue ratio worldwide. In the case of the NFPS debt this ratio tripled in the last 13 years. In the case of the Consolidated Public Sector debt, the ratio doubled during the last 12 years.The Dominican Republic is in danger of a downgrade in risk ratingsThe COVID-19 situation has led to a deterioration in debt sustainability indicators. Although the government understands that resources amounting to 5.3% of GDP are required annually to address the country's fiscal problems, the tax reform proposal would seek to generate revenues of 2.35% of GDP in 2022 and 1.79% in 2025, given that some measures are transitory. According to the document, the objective of the reform in the short term would be to ensure debt sustainability, and in the medium term resources would be released to expand spending in other priority areas. With the proposed reform, the NFPS ...

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